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Proxy Voting Season Overview ROBECO
JANUARY – JUNE 2018
IN NUMBERS
% Votes in favor of shareholder resolutions
Shareholder Meetings by Country and Region
PROXY VOTING SEASON OVERVIEW | 2
Meetings voted
Environmental SocialCorporate Governance
% meetings voted against management
Proposals voted
Countries where we voted
4,120
71.6% 78.4% 81.6%
56%
46,925
72
> 1,000
200-999
50-199
11-49
0-10
Voting Activity per topic
Proposal
Audit/Financial
Changes to company statutes
M&A
Board Related
Capital management
Executive compensation
Shareholder Resolutions
With management Against management 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
PROXY VOTING SEASON OVERVIEW | 3
INTRODUCTION
Contents
Introduction P3
General Highlights P4
Summary of the main trends identified by the voting team after the
proxy voting season
Board Composition P8
Through our voting activities we encourage companies to build
independent, knowledgeable and diverse boards
Executive Remuneration P12
Executive compensation plans shall align pay and performance
while promoting long-term shareholder value creation
Shareholder Proposals P16
We support sound shareholder resolutions that consider material
ESG factors relevant for the company’s strategy
Robeco’s Proxy Voting Approach P20
Description of how voting rights are exercised by Robeco
Globally, there has been plenty to discuss on corporate governance,
with the 2018 AGM season representing a busy time for the Robeco
Active Ownership team. During the first half of the year, we voted upon
47,000 proposals at 4,100 shareholder meetings across 72 countries.
Despite the fact that engagement and voting on governance issues
is an all-year activity for the team, the annual AGM season places our
governance activities clearly into the spotlight.
At the AGM, new board members are elected, new remuneration
policies can be introduced and shareholders have the opportunity to
file resolutions as part of their engagement with a company.
As in previous years, the remuneration and composition of corporate
boards and executive management teams have been a focus of our
voting approach.
Yet our voting activities do not only relate to corporate governance,
with companies’ environmental and social performance also
incorporated into our voting analysis. This is particularly relevant for
voting on shareholder proposals, which represent a key way in which
shareholders can affect a company’s performance on these issues.
With transparency being at the core of our Active Ownership approach,
this report is written to show how we put our voting policy into
practice.
Carola van LamoenHead of Active Ownership
PROXY VOTING SEASON OVERVIEW | 4
Proxy voting is an integral part of Active Ownership. The aim of our voting
activities is to encourage good governance and sustainable corporate practices,
which contribute to long-term shareholder value creation. Below we provide an
update on some of the themes we observed during proxy season 2018.
Blurring Lines in Corporate Political ActivityAlmost a decade ago the Unites States
Supreme Court ruled in favour of the
conservative non-profit organization
Citizens United in a lawsuit against the
Federal Election Commission (FEC). The
Court decided US laws which prohibited
(non)profit corporations, labour unions,
and other associations, from making
independent political expenditures (i.e.
not coordinated with a candidate) were
unconstitutional in that they placed
an unacceptable limit on freedom of
speech. As a result, corporations in the
US were able to significantly increase
their corporate political activity (CPA).
Since that time, the extent to which
corporations are able to act to influence
governance policy has dramatically
increased. Besides pure lobbying, there
also are several other possibilities of
engaging in political activity, with one
familiar way being through Political
Action Committees (PACs). PACs are
founded to raise funds for a specific
political purpose. PAC contributions
only come from individuals and are
spent on the goal of the PAC, e.g.
contributions to politicians or parties.
However, innovative ways to increase
political spending without mandatory
disclosure are on the rise, in the form
of so called ‘Dark Money’. A significant
part of corporate funds are donated to
501(c) organizations, which are set up
to pursue a specific societal purpose,
of which the trade and social welfare
organizations are the most prominent.
As these organizations are not obliged
to disclose any of their donors or
expenses, corporate lobbying activities
can become considerably more opaque.
General Highlights
Codes of conduct- ICGN Global Governance Principles
Our voting policy is based on the widely accepted principles of the International Corporate Governance Network (ICGN), which provide a broad framework for assessing company’s corporate governance practices. We constantly monitor the consistency of our general voting policy with the ICGN principles, with laws and governance codes and systems as well as client specific voting policies. Our voting policy is formally reviewed at least once a year. We also take into account company specific circumstances and best practices when casting our votes.
PROXY VOTING SEASON OVERVIEW | 5
GENERAL HIGHLIGHTS
As investors, transparency is key in
understanding the potential legal,
reputational and subsequent investment
risks which can arise from such opaque
lobbying practices. Firstly, it is corporate
money spent via, and on, means that
are not always proven to be effective,
raising the question as to whether
corporate money is spent wisely. Second,
a reputational risk exists in relation
to proving that the company ‘puts its
money where its mouth is’. This is often
not the case, and when this comes
out, the reputational damage can be
severe, with many notable examples of
companies lobbying activities backfiring
into severe reputational damage.
Investors are therefore increasingly
demanding more transparent disclosure
of companies political and lobbying
activities, as a means to factor these
risks into the investment decision
making process. Shareholders have
become increasingly aware of these
risks. Between 2010 and 2016 a total of
795 shareholder resolutions were filed
in the US alone, specifically addressing
companies political spending and
lobbying activities, with 84% of the
proposals targeted specifically at
increased disclosure of lobbying or
election spending. On average, these
lobbying disclosure proposals can count
on 25% support while political spending
proposals gain 33% votes in favour.
U.S. makes great progress on boardroom diversity The United States is making great
strides on the topic of gender diversity
at the board level in comparison to
other developed markets. A recent
Spencer Stuart survey found that in
2017, half of the incoming directors
on S&P 500 boards were women or
from minorities. Female representation
among new directors rose from 26% in
2012 to 36% in 2017, while 20% of new
independent directors were male and
female minorities.
Gender diversity on boards has
improved prominently in recent years
across several market capitalizations
and markets. Government intervention
in this area has increased, as several
countries (e.g. India, France) adopted
legislative measures to promote
gender diversity at board level through
mandatory gender quotas. However,
the debate around the topic moved
from a discussion around equality
and fairness, to a matter of superior
corporate performance, evidenced by a
wide range of literature.
So, what do these people do? Corporate
boardrooms provide management
and risk oversight while supervising
the company’s strategy on behalf of
the shareholders. Diversity becomes a
crucial factor to promote success at the
boardroom when understood from a
broader perspective, moving beyond
solely gender equality and including
diverse representation of tenures,
ages, nationalities and professional
backgrounds.
It’s simple – diversity at the boardroom
reflects the real world in which the
company operates. An appropriate
variety of director profiles allows for a
better understanding of the company’s
customer base, ensuring better
adaptability to shifting consumer and
market trends at an ever-increasing
pace. A wide range of perspectives in
the boardroom is critical to effective
corporate governance and potential
disruptive discussions.
Well-diversified boards add value
to a company since people from
different backgrounds are more likely
to approach issues from differing
perspectives, leading to more effective
decision-making and efficient
supervision. Therefore, institutional
investors have been praising board
diversity as a key to sound corporate
governance practices.
As part of Robeco’s Active Ownership
approach, we have been addressing
diversity in the boardrooms of our
investee companies through our
engagement and voting activities. In
several markets, it is common to find
director nominations to serve on the
board included on the shareholder
meeting’s agenda. A thorough
assessment of the overall board
diversity in terms of tenure, skills,
gender and external commitments is
conducted and compared to local best
practices. Our voting guidelines have
been recently updated to reflect this
assessment criteria.
In recent years, much of the focus on
board diversity has focused solely on
gender. However, if the argument for
increased diversity is that it adds value
PROXY VOTING SEASON OVERVIEW | 6
GENERAL HIGHLIGHTS
to the board, then boards must strive
to achieve diversity in the broadest
sense in order to enhance business
performance.
Revisions to the UK Corporate Governance Code
Revisions to the UK Corporate
Governance Code were suggested by
the UK Financial Reporting Council
(FRC) in December 2017. The proposed
changes aim to enhance corporate
accountability, unlock sustainable
long-term growth, and to enhance the
attractiveness of the UK capital market.
After a consultation period, the final
version of the revised Code e 2018. The
main changes involve the revision of a
companies’ leadership and purpose,
remuneration, internal controls,
board composition, succession and
evaluation.
More stringent criteria have been
included in the new Code for assessing
directors’ independence. After a non-
executive director, regardless of his
function, serves for more than nine
years on the board, the nominee can no
longer be deemed as an independent
board member. Although we agree
that long tenures might compromise
directors’ independence, setting such
a hard-rule threshold for directorship
tenures can achieve unintended
consequences as it neglects the specific
roles held by the directors and might be
over prescriptive.
Furthermore, responsibilities at
the board level should be clear and
made publicly available. Directors
combining the roles of chairman and
chief executive officer are no longer
acceptable under the revised Code.
Moreover, the Code provides for the
chair to be independent at all times.
Enhancing diversity both at the board
and executive level became one of the
key topics included in the proposed
Code. Companies must disclose the
actions they undertake to increase
ethnic and gender diversity, especially
at the executive level. These set of
amendments are deemed a positive
development as it improves the board
composition guidelines and aligns the
country’s code to international best
practices.
Changes have also been proposed to
the topic of executive remuneration.
The remuneration committee should
demonstrate how pay and incentives
are properly aligned across the
company. Boards might be able to
override remuneration outcomes if
pay and measured performance are
not aligned. Share awards provided
to executives should have a holding
period from three to five years to
encourage companies to prioritize long-
term decision making. Shareholders
are better served if these changes are
implemented, as it further aligns pay
and performance while prioritizing
long-term shareholder value creation.
After this revised version takes effect it
has the potential to trigger significant
changes in terms of corporate
governance practices. We view these
amendments as a positive step towards
the long-term success of the companies’
businesses, which in turn will contribute
to generate value for shareholders and
a wider set of stakeholders.
Brazil’s push for corporate governance reform Good corporate governance practices
help to build a transparent and
accountable business environment,
and in turn contribute to fostering
long-term shareholder value creation.
However, corporate governance also
remains a key risk factor for investors in
emerging markets. This occurs due to
a wide range of factors at both country
and company level, such as weak rule
of law or the presence of controlling
shareholders.
In Brazil several regulatory entities have
striven to increase foreign investment
in the market by better aligning the
country’s corporate governance
standards with other models applicable
in developed markets, whilst also
aiming to provide greater protections
for minority shareholders. When
local codes or guidelines change, this
can create some momentum, and
investors can provide feedback on the
implementation of new codes.
The recent change in listing
requirements for the Novo Mercado,
the top-level listing on the Brazilian
exchange, is an appropriate example.
Many Brazilian companies historically
have a dual share class structure
and an agreement with the largest
shareholders. Effectively, this often puts
the company under the control of a
single entity, even if the company is not
majority owned.
The exchange proposed several
governance improvements for the
top-level listing, including strict
requirements for the share structure,
disclosures around remuneration and
nomination policy, and minimum
standards for independence at board
level. If these new requirements
are implemented well, they can
very beneficial for the position of all
investments.
To assess the quality of governance of
Brazilian companies requires in-depth
knowledge of the market and the
various players involved. Robeco
recently joined Brazil’s Association of
Institutional Investors (AMEC), a group
of domestic and foreign investors with
400 billion reais (USD 97 billion) of
assets on the Brazilian Stock market.
The aim of this network is to protect
shareholder rights for minority investors
and gain ESG improvements in topics
such as food safety, environmental
risk management and anti-corruption
PROXY VOTING SEASON OVERVIEW | 7
GENERAL HIGHLIGHTS
controls. AMEC network facilitates
the understanding of governance
developments in the market, and
promises to be a great platform for
continuing Robeco’s engagement
efforts with Brazilian public companies.
We believe the push for better corporate
governance practices in Brazil is already
beginning to bear fruit, and strongly
support the continuation of this effort.
Several of the regulatory changes put
forward in the last couple of years
have the potential to induce significant
changes in the market’s corporate
governance arena.
PROXY VOTING SEASON OVERVIEW | 8
16,375
1,487
378
64
65
12
607
84
For Against
Board Composition
The quality of a corporate board is vital to good corporate governance. It is a
board’s responsibility to make sure that the company’s decisions are in line
with the shareholders’ interests. Investors should be able to assess a board
members’ capacities and added value to the board, whilst a companies
nomination process should ensure that potential risks are restricted by
having the right skills mix, competencies and independence at both the
supervisory and executive board level. We wish to see boards which not only
have a high degree of independence, are diverse across a range of metrics,
and that also reflect the diversity of the business, the challenges and the
economic context within which it operates.
Voting activity by a selected sample of proposal types
Proposal
Election of Directors
Election of Statutory Auditors
Election of Alternate Statutory Auditor
Ratification of Board Acts
PROXY VOTING SEASON OVERVIEW | 9
BOARD COMPOSITION
Capitol Federal Financial
Capitol Federal Savings Bank operates
as a federally charted stock savings
bank. It offers savings accounts and
certificates of deposit, checking
accounts, bill payments, mobile
banking services, and telephone
banking services.
Meeting Date: 23rd January 2018
At the annual general meeting of
Capitol Federal Financial, Robeco voted
against the re-election of the current
chair of the nominating committee,
due to our concerns as to the overall
independence at the supervisory
board level. In order to achieve
effective supervision of management,
it becomes imperative that the
board can exercise independent and
objective judgement whilst being free
of conflict of interest. Therefore, we
believe that either the CEO should not
simultaneously hold the position of
chairman of the board or, if this is the
case, that a lead independent director
should be appointed.
Independent board chairs are typically
better able to oversee executives
and set a pro-shareholder agenda
without the conflicts of interest that
an executive officer can face. One
additionally important criteria when
assessing board independence in the
key person risk which can develop,
particularly if the CEO is also the
chairman of the board.
Therefore, in case the position of
board chair is held by an insider or
affiliate, it is the responsibility of the
nominating committee to appoint an
independent lead or presiding director.
In this case, Capital Federation’s former
and current nominating committees
have repeatedly neglected to install
either and independent chairman,
or a lead independent director. As a
result, the company has a combined
CEO/Chair mandate, without ensuring
certain level of independence in the
boardroom by appointing a lead
independent director.
At the 2018 AGM, 79% of shareholders
voted in favor of the proposal, and
the candidate was elected to the
board. However, we will be monitoring
future developments as we strongly
emphasize the need for independent
lead positions.
Hyundai Mobis Co.
Hyundai Mobis Co. Ltd. Manufactures
and sells automotive parts
worldwide, such as cockpit, front
end, and chassis modules. Safety,
braking, steering, lamp, and air
suspension systems. The company
also contracts environmental projects
including sewage treatment plant
and industrial waste water treatment
plant construction.
Meeting Date: 9th March 2018
At the 2018 AGM of Hyundai Mobis,
Robeco voted against the election of
director’s proposal, due to our concern
as to the level of independence of the
board. We voted against the proposal
because two of the three candidates up
for election could not be classified as
independent by the standard of local
market best practice. Robeco’s voting
policy dictates that, at minimum,
the number of independent directors
should at least be in line with local
independence guidelines. According
to the Commercial Act in Korea, a
listed company with assets over KRW
2 trillion is required to appoint at least
three independent directors, and the
independent directors should comprise
a majority of the board.
In the case of Hyundai Mobis’
2018 AGM, after having evaluated
the candidates’ independence,
we concluded that the board was
composed of only 40% independent
board members when factoring in
their candidates’ senior positions at
law firms representing the company.
In addition, we have concerns as to
the attendance of one board member
up for election. According to company
disclosures, the board member in
questions failed to attend at least 75%
of the board- and committee meetings,
which we view as a failure to sufficiently
fulfil his duties as a board member.
We therefore voted against the election
of director’s proposal at the company’s
2018 AGM, due to our concerns with
the overall independence of the board.
Samsung Electronics
Samsung Electronics Co., Ltd.,
together with its subsidiaries,
engages in the consumer electronics,
information technology and mobile
communications, and device solutions
businesses worldwide.
Meeting Date: 23rd March 2018
Diversity is one aspect we pay
attention to when assessing the overall
composition, and effectiveness, of
a board of directors. We wish to see
boards which are not only diverse
across a range of metrics, but also
PROXY VOTING SEASON OVERVIEW | 10
BOARD COMPOSITION
reflect the diversity of the business, the
challenges and the economic context
within which it operates. Robeco
believes that a diverse workforce at all
levels of the organization with equality
of opportunity for both should support
business performance, and therefore
financial performance, over time.
Concurrently, an ever-greater number
of companies are convinced that a
well-diversified board adds value to
the company. A common argument
is that boards with people from
different backgrounds are more likely
to approach issues from various
perspectives, leading to more
comprehensive decision-making and
more effective supervision.
In recent years, much of the focus on
board diversity has focused solely on
gender. Boards must strive to also
be diverse in the broadest sense, for
example on nationality (to help in
understanding the culture/geography
of the organization), age (to balance
new perspective vs understanding of
business) and sector experience (to
achieve a skill set which matches the
underlying operations of the business).
We are therefore happy to see that the
three new board members presented
for election at Samsung Electronics
2018 AGM met the criteria outlined
above, with backgrounds ranging
from legal service to semiconductor
experience. In addition, Samsung
also recently took the step of splitting
the function of Chair and CEO, which
we view as a progressive step in the
company’s corporate governance
regime.
Whilst the newly appointed chairman
is not deemed as independent, due to
his former role as CFO of the company,
we still view this as a positive first step
on the part of the company. In addition,
during our pre-AGM conference call
with the company’s investor relations
team, we were pleased to hear that in
future the company would consider the
instillation of a fully independent board
chair.
At the AGM, all members were
re-elected to the board. We will
continue to engage with the company
in the coming year to further improve
corporate governance at the company,
in collaboration with the company’s
current efforts.
Bezeq Israeli Telecommunication Corporation Ltd.
Bezeq Israeli Telecommunication
Corporation Ltd. offers local,
long-distance, and international
telecommunications services in Israel.
The Company also offers Internet
access lines, calling cards, and high
volume data transfer networks.
Meeting Date: 26th April 2018
Structural issues within Bezeq have
significantly affected the recent stock
price trend, which has declined by 25%
in the last year after several legal and
regulatory proceedings were initiated
by the Israeli Securities Authorities.
Issues involving management
turnover and uncertainty, inadequate
corporate governance practices and
regulatory risks have directly affected
the company and raised significant
shareholder concerns. At this year’s
AGM shareholders had to cast theiri
votes amidst severe turmoil, especially
in relation to the board nominations
put forward by shareholders and the
company.
In June 2017 the Israel Securities
Authority (ISA) started an investigation
in relation to a related party transaction
involving an overpayment in the
purchase of DBS Satellite Services
(YES), which primarily benefited
Bezeq’s indirect controlling shareholder
Eurocom Holdings. A couple of months
later this investigation was expanded to
a interested party transaction regarding
the provision of services at an unusually
high price between YES and Spacecom
Communications, a sister company
controlled by Eurocom.
Bezeq has experienced management
turnover following two series of
arrests beginning in July 2017. Most
recently, this has included former CEO
and former chairman. Following this
detention, the CEO resigned from her
role in March 2018 and the company
announced the appointment of a new
CEO, Mr. Paz.
At the April AGM, the board included,
at the request of minority shareholders,
multiple qualified candidates
competing for limited seats, instead of
proposing separate slate of candidates.
Elliot Advisors, who revealed a 4.8%
stake at the company in January
2018, called for the resignation of
board members implicated in the
investigation. A vote against three
board members was cast by Robeco due
to their involvement with the Eurocom
group. Although these nominees were
not implicated in the proceedings,
the controversy surrounding the
controlling shareholder raises concerns
about governance standards and the
protection of minority shareholder
rights by the board.
A shareholder resolution was also
filed by a group of Israeli institutional
investors requesting shareholders
to cast a vote of no confidence for
two external directors since their
appointment was not up for vote his
year. These directors were involved
in the approval of the related party
transactions and other actions that
are being currently investigated by the
ISA. We supported this resolution as
we believe there is sufficient evidence
to question whether these directors
represented the interest of the company
and its minority shareholder during
their tenure.
PROXY VOTING SEASON OVERVIEW | 11
BOARD COMPOSITION
PROXY VOTING SEASON OVERVIEW | 12
Executive Remuneration
How company executives are incentivized financially can have
significant and wide ranging consequences on firm performance
and the subsequent creation of long term shareholder value.
An appropriately structured remuneration policy should align
executive pay with company strategy, by incentivizing executives
to create long term, sustainable shareholder value. When voting
at shareholder meetings, Robeco uses an executive compensation
analysis model to guide our voting instructions where executive
compensation is concerned.
523
336
203
72
584
232
896
112
For Against
Voting activity by a selected sample of proposal types
Proposal
Advisory vote on executive compensation
(U.S.)
Remuneration Policy (forward looking)
Remuneration Report
Director’s Fees
PROXY VOTING SEASON OVERVIEW | 13
EXECUTIVE REMUNERATION
Novartis AG
Novartis AG manufactures
pharmaceutical and consumer
healthcare products. The Company
produces pharmaceuticals for
cardiovascular, respiratory and
infectious diseases, oncology,
neuroscience, transplantation,
dermatology, gastrointestinal and
urinary conditions, and arthritis,
vaccines and diagnostics, vision, and
animal health products.
Meeting Date: 2nd March 2018
More than one third of Novartis’
shareholders, including Robeco, voted
against its executive compensation
package at the company’s 2017
shareholder meeting. Following
this large display of opposition by
shareholders, the company carried
out an intensive campaign to engage
with investors and amended the
structure of the compensation
plan. A set of positive changes were
implemented in the both the short
and long-term incentive package,
which mitigated the concerns raised
previously by shareholders. Because of
the positive changes rolled out by the
compensation committee, this year we
supported the executive compensation
included on the agenda of Novartis’
2018 annual general meeting.
A study by AMP Capital highlights that
“incentives linked solely to financial
metrics might trigger negative
culture and conduct”. Yet when using
qualitative performance metrics
companies should provide sufficient
disclosure regarding how performance
is assessed and measured. Novartis
aimed to simplify the set of qualitative
metrics included in its compensation
package to better align these to
the company’s strategy. Individual
objectives included under the balanced
scorecard were removed, metrics
included in the strategic scorecard
were modified to better capture the
company’s values and behaviors
and it lowered the weight of these
performance metrics included in
the annual bonus. We believe this
enhances the objective performance-
based component of the annual bonus,
ensuring that pay will be better aligned
to effective performance.
Using solely absolute metrics may
reflect economic factors beyond the
control of executives rather than
the executives’ own performance.
Therefore, we view positively the
current mix of absolute and relative
performance metrics included
under Novartis’ long-term incentive
package. Moreover, the vesting
schedule applicable for the relative
TSR metric has been amended to
ensure that pay-outs are not awarded
if Novartis performs below peers’
median performance. This represents a
positive development aimed to further
strengthen the alignment between
executives’ pay and performance.
We believe Novartis has taken
appropriate steps to address
shareholders’ concerns and align its
executive compensation package
to best practice guidelines. The set
of changes implemented under the
variable pay improve the overall
incentive structure and further reinforce
the used of formula-based performance
metrics while assessing relevant
qualitative criteria. Accordingly, we
supported the compensation proposal
at the company’s 2018 AGM.
Walt Disney
The Walt Disney Company is an
entertainment company that conducts
operations in media networks, studio
entertainment, theme parks and
resorts, consumer products, and
interactive media. The company
produces motion pictures, television
programs, and musical recordings, as
well as books and magazines. Disney
is a Dow 30 company and had annual
revenues of $55.1 billion in its fiscal
year 2017.
Meeting Date: 8th March 2018
At the 2018 AGM of Walt Disney Co,
Robeco voted against the advisory vote
on executive compensation due to our
concerns over the structure of executive
pay at the company. How company
executives are financially incentivized
can have significant and wide-ranging
consequences on firm performance
and the subsequent creation of long
term shareholder value. We believe
executive compensation plans should
include a component which allows
for reduction in rewards when firms
underperform, ensuring that executive
pay and the company’s performance is
properly aligned.
Whilst the company’s Total Shareholder
Return (TSR) over the last 5 years has
consistently trailed the industry peer
group median, CEO compensation has
continued to rank amongst the highest
when measured against the same peer
group. Whilst the current CEO has a
long track record of strong performance
in his role, the link between pay and
performance has not been maintained
PROXY VOTING SEASON OVERVIEW | 14
EXECUTIVE REMUNERATION
in years in which performance
worsened.
In addition, we have concerns around
the metrics used, particularly the
overlap of metrics used in the short
and long-term components of the
plan. Having a narrowly focused plan
based upon a single metric may fail to
align long term pay for performance.
Performance targets should therefore
be set clearly, ensuring that these are
aligned with the company’s strategy
and subsequently with long term
shareholder value creation.
Given our concerns outlined above,
we voted against the advisory vote on
executive compensation, which was
rejected by 52% of shareholders. In
the coming months, we encourage
the company to engage in constructive
dialogue with its shareholders to
address their concerns.
Persimmon Plc
Persimmon plc designs, develops,
and builds residential housing
units. The Company constructs
residential homes ranging from
studio apartments to executive
family homes throughout the United
Kingdom.
Meeting Date: 25th April 2018
At the Annual General Meeting of
Persimmon plc, shareholders were
requested to approve the company’s
remuneration report for the year 2017.
The company achieved a threefold
increase in its net income while
experiencing a sharp boost of its share
price, certainly benefitting a wide range
of stakeholders. Yet three executives
alone earned a combined £104m last
year. Although everything comes with
a cost, shareholders have the intrinsic
responsibility to consider their voting
positions when assessing if such cost is
justifiable and acceptable in the long
run. After engaging with the company
prior to the AGM, Robeco voted against
Persimmon’s executive compensation
package at its shareholder meeting
held in York on April 2018.
A bonus scheme was approved by
shareholders in 2012 awarding market
value options, however the design
of this package did not consider any
ceiling were the share price were to
rise above expectations. Since the
performance targets were exceeded
at large as the share price soared,
the CEO will be entitled to a total
award in excess of £104 million once
the payment vests in full in 2018. We
believe that such significant quantum
is not justifiable when bearing in mind
the long-term interests of the company,
its shareholders and the wider society.
Although we take into account the
excellent financial results achieved by
the company, we consider that it poses
an excessive cost on shareholders in
part due to the reputational damage
associated with the excessive pay.
Prior to casting our votes at the
shareholder meeting, we had the
opportunity to speak to Persimmon’s
interim Chairman of the Board and
the newly appointed Chairman of
the Compensation Committee. They
actively encouraged the executives to
decrease the size of the awards prior
to putting the agenda item up for vote.
However, Persimmon’s compensation
package failed a wide range of the
tests incorporated in our executive
compensation framework, which in
summary stemmed from the poor
design of the package itself, leading to
excessive awards.
Although we acknowledge the positive
steps taken by the company and its
executives, including halving the share
entitlement and implementing a share
price cap, we believe a vote against this
proposal is warranted. The proposal
was approved at the company’s
shareholder meeting with a 51.5%-
48.5% majority, with around 30% of
shareholders abstaining. We will be
following up on the dialogue initiated
with Persimmon in the upcoming
months, and will provide our input
into the design of the new long term
incentive package.
AT&T Inc.
AT&T Inc. is a communications
holding company. The Company,
through its subsidiaries and affiliates,
provides local and long-distance
phone service, wireless and data
communications, Internet access
and messaging, IP-based and
satellite television, security services,
telecommunications equipment, and
directory advertising and publishing.
Meeting Date: 27th April 2018
The gap between pay for U.S. chief
executive officers and workers within
their companies has widened six fold
in the last three decades, according
to Bloomberg. Executives in the S&P
500 made 347 times more than their
employees in 2016, up from 41 to 1 in
1983. Compensation packages need
to be competitive enough to attract
and retain talented executives, whilst
being tied to corporate performance
and ensuring long term shareholder
value. However, both the costs
posed on shareholders of executive
compensation packages, and their
overall structure, need to be heavily
scrutinized when casting votes at the
shareholder meeting. For that reason
we voted against the advisory vote
on executive compensation at AT&T,
Inc annual shareholder meeting for a
fourth consecutive year.
A large majority of the company’s pay
package is comprised by the equity
awards granted under the long-term
incentive package (LTIP), representing
almost 60% of the CEO’s total
compensation. Although performance
shares are provided to executives after
PROXY VOTING SEASON OVERVIEW | 15
EXECUTIVE REMUNERATION
assessing the company’s performance
against ROIC and relative TSR, not
sufficient disclosure is provided
to assess the actual performance
delivered by executives. We deem
of utmost importance to provide
sufficient disclosure to shareholders
regarding how performance is assessed
and measured, especially when it
represents such a large component of
the total executive pay.
Relative performance metrics allow
direct comparison of the company’s
performance against peers, in contrast
to absolute metrics that may reflect
economic factors beyond the control
of executives. Yet, when relative
metrics are used, these should be
ambitious enough to responsibly
incentivize management for its actual
performance. AT&T has included
relative TSR in its LTIP, however it allows
for pay-outs even though the company
underperforms peers since its threshold
performance is the 4th quartile. We
believe that awards shall be provided
if the company at least registers a TSR
performance target aligned with the
median of peers.
Improvements could be implemented
to better align the pay practices
of the company to the executive
compensation put forward by peers.
A review on the disclosure and target-
setting of the long term incentive plan
would be highly recommended. We will
continue monitoring the company’s
pay practice in the following months.
PROXY VOTING SEASON OVERVIEW | 16
Shareholder Proposals
We view sustainability as a long-term driver of change in markets, countries and
companies which impacts future performance. Based on this belief, sustainability is
considered as one of the value drivers in our investment process, similar to the way
we look at other drivers such as company financials or market momentum. Both the
management and board of listed companies are accountable for the company’s long
term strategy and management of ESG issues. Robeco believes that companies that
have strong sustainability and governance policies in place are more likely to act in the
best interest of all their stakeholders, and are better positioned to deal with a variety
of issues, such as non-financial risks and changing regulation. We analyze shareholder
proposals on a case by case basis, supporting those which we believe will have a
positive imapct on long term, sustainable shareholder value creation.
18
0
3
0
28
5
23
0
12
9
For Against
Voting activity by a selected sample of proposal types
Proposal
SHP sustainability or environmental reports
SHP Adoption of Comprehensive Recycling
Strategies
SHP Reviewing Political Spending or
Lobbying
SHP Independent Board Chairman/
Seperation of Chair and CEO
SHP Shareholder Access to the Nomination
Process (Proxy Access)
PROXY VOTING SEASON OVERVIEW | 17
SHAREHOLDER PROPOSALS
Tyson Foods, Inc.
Tyson Foods, Inc. produces,
distributes, and markets chicken,
beef, pork, prepared foods, and
related allied products. The
Company’s products are marketed
and sold to national and regional
grocery retailers, regional grocery
wholesalers, meat distributors,
warehouse club stores, military
commissaries, and industrial food
processing companies.
Meeting Date: 8th February 2018
Water represents a critical resource
for the meat production supply chain,
yet its use has wide ranging material
sustainability impacts for companies
operating within the sector, and
society at large. Impacts through direct
company operations and via the supply
chain include excessive wastewater
discharges at slaughtering facilities,
unmanaged livestock manure at
animal facilities and excess fertilizer
runoff associated with growing animal
feed. It is therefore one aspect which
we expect companies operating within
the sector to pay particular attention to.
For these reasons, we supported a
shareholder proposal at the 2018
Annual General Meeting of Tyson Foods
Inc, requesting the company to adopt
and implement a water stewardship
policy designed to reduce risks of
water contamination at Tyson-owned
facilities, facilities under contract
to Tyson and Tyson’s feed suppliers.
Robeco’s approach to assessing
shareholder proposals always includes
an assessment of the merits of the
proposal itself, as well as how the
company’s performance on the issue in
questions relates to their peers. In this
instance, the financial materiality of
the proposal becomes clear as both the
company’s customers and direct peers
continue to take action to improve their
approach to water stewardship.
Walmart, the Company’s largest
customer, has strict supplier
expectations on management of
water, manure, nutrients, and fertilizer
use, demonstrating the clear risks
in the company failing to conform
with the sustainability criteria set by
their customers. Furthermore, the
company lags behind many of their
established peers in the area of water
management. Amongst others, Hormel
have adopted a Sustainable Agriculture
Policy with commitments on water
quality and supply chain management,
Smithfield set a target for 75% of
the grain they purchase to be grown
with efficient fertilizer and soil health
practices by 2018 (with associated
reduction in nitrate pollution of water
resources), whilst Perdue invested $68
million to launch a large-scale poultry
litter recycling operation to prevent
nutrient pollution of local water
resources.
As Tyson also continues to reposition
its business model towards consumer
sales, it must also stay in alignment
with rising consumer expectations
around sustainable business practices.
Given that Tyson continues to be
exposed to numerous investigations
and lawsuits related to violations of the
Clean Water Act, including pleading
guilty to two criminal charges in 2017,
resulting in a $2 million criminal fine
and additional $500,000 for clean-up
costs, the need for a more robust water
stewardship policy is clear.
At the 2018 Annual General Meeting,
approximately 63 percent of
independent shareholder votes cast
supported the proposal. However,
due to the companies share class
structure, whereby the Tyson Limited
Partnership controls approximately
70.5% of the Company’s total voting
power, the proposal received the
support of only 15% of all votes. Given
that the majority of the company’s
independent shareholders supported
this proposal at the companies last
three shareholder meetings, we see
this as a strong signal to the company
to implement the proposal in the
coming year.
Citigroup
Citigroup is a global financial-
services company doing business
in more than 100 countries and
jurisdictions. Citicorp, the company’s
core business, consists of the global
consumer banking segment, which
provides basic branch banking around
the world, and the institutional
clients group, which provides large
customers with investment banking,
cash management, and various other
products and services.
Meeting Date: 24th April 2018
Compensation plans providing
windfalls to executives which are
unrelated to their performance can
pose an excessive cost for shareholders.
Citibank provides its senior executives
with accelerated vesting of equity-
based awards in case they voluntarily
resign from their current employment
and decide to pursue a career in the
government service. A shareholder
PROXY VOTING SEASON OVERVIEW | 18
SHAREHOLDER PROPOSALS
resolution was therefore filed at
Citibank’s shareholder meeting
requesting the Board of Directors to
remove this provision of a so-called
government service parachute. Robeco
voted in favor of this resolution for the
fourth consecutive year.
Equity plans should be designed
in order to attract and retain high
quality executive talent. Yet it appears
that this provision may encourage
executives to resign from their current
employment if an opportunity to
pursue a career in the public sector
arises. Citigroup claims that this
alternative career provision is needed
to remain competitive for talent in
financial services industry as many
peers include it in their employment
benefits. However, as of the end of
2017, only eight participants out of
eight thousand eligible employees
benefited from this provision. We
remain reluctant to acknowledge the
relevance of this provision to effectively
attract and retain executives.
It is considered best practice to allow
for accelerated vesting of equity awards
under the exceptional circumstance in
which a company is facing a takeover
transaction and the executives are
involuntarily terminated from their
current employment. In contrast, major
Wall Street investment banks include
government service parachutes which
are triggered if the executive voluntarily
resigns from his employment. We
believe this provision raises troubling
public policy and ethical questions and
we question why shareholders shall
bear the cost of the second career
choices of executives. Therefore, we
consider that executives voluntarily
resigning from their job positions shall
be entitled to a pro-rata vesting of their
stock awards accounting for the actual
performance delivered.
Proxy disclosure requirements put
forward by The Securities and Exchange
Commission (SEC) only require
companies to report on the golden
parachute information provided to the
named executive officers. As a result,
shareholders do not have sufficient
information regarding the payouts
provided to other senior executives.
Thus we consider that allowing
the company to provide windfall
payments to executives which are not
performance-related and not properly
disclosed is not in the best interest of
shareholders.
We have been systematically
supporting this shareholder proposal
filed at several investment banks
throughout the years. For Citigroup
in particular, we voted in favor of
this agenda item already for four
consecutive years. The shareholder
support for this resolution increased
from 26% in 2015 to almost 40%
in 2018. We will continue standing
behind these types of resolutions and
monitoring this trend going forward.
Verizon Communications Inc.
Verizon Communications Inc.,
through its subsidiaries, offers
communications, information, and
entertainment products and services
to consumers, businesses, and
governmental agencies worldwide.
Meeting Date: 3rd May 2018
An increasing number of companies
are also beginning to build
sustainability performance into their
remuneration policies, a trend that
Robeco encourages and supports.
We use RobecoSAM materiality
frameworks to assess the most relevant
sustainability factors for a company
and support the inclusion of these into
executive pay metrics. In order to be
value adding, and to further enhance
the link between pay and long-term
performance, companies should
include material ESG factors in the
long-term component of executive pay.
When sustainability or other non-
financial metrics are used in a
remuneration program, such metrics
should add value for stakeholders and
should not create extra bonus pay-outs
for normal managerial responsibilities.
For example, executives should not
receive additional awards for simply
maintaining their license to operate
in terms of preventing significant
environmental damage as a result
of their operations. Non-financial
targets should therefore be designed
to enhance performance, rather than
additionally rewarding management
for normal expected business practices.
For companies operating within the
telecommunications sector, cyber
security is of the upmost importance
when considering financial materiality.
Companies are facing an ever-greater
number of cyber-attacks, with the
number of data breaches increasing
by nearly 70% from 2015 to 2017
in the US alone, according to the
US-based think tank, the Identity Theft
Resource Center. In addition, the costs
to shareholders of such breaches are
rising, as we have seen in a plethora
of recent cases where cyber breaches
have had a direct and immediate
impact on share price. Recent analysis
by insurance broker Lloyds suggests
that a major global cyberattack has
the potential to trigger USD 53 billion
of economic losses, roughly equivalent
to the cost of a major natural disaster
such as 2012’s Superstorm Sandy.
Given the strong materiality of the
topic, we believe it to be appropriate
that companies operating in certain
sectors, such as telecommunication,
use performance on cyber security
in executive compensation plans. At
the 2018 Annual General Meeting
of Verizon, we therefor supported
a shareholder proposal requesting
that the company publish a report
assessing the feasibility of integrating
PROXY VOTING SEASON OVERVIEW | 19
SHAREHOLDER PROPOSALS
cyber security and data privacy metrics
into the performance measures of
senior executives under the company’s
compensation incentive plans. At
the 2018 shareholder meeting, the
proposal received the support of 11% of
shareholders.
American Express
American Express Company, together
with its subsidiaries, provides charge
and credit payment card products and
travel-related services to consumers
and businesses worldwide.
Meeting Date: 9th May 2018
To achieve effective management
supervision, it is imperative that
the board can exercise independent
judgment and is free of conflicts of
interest. A continual focus of Robeco’s
voting activities is therefore the
promotion of board independence,
whether by promoting an increased
percentage of independent
representation on the board, or
in the separation of the CEO and
Chairman positions. However, there
are major differences in the extent
to which board members can be an
effective counterweight to the CEO.
One important criteria when assessing
board independence is the ‘key person
risk’ which can develop, particularly if
the CEO is also chairman of the board.
In the US market in particular, it is
common to combine the roles of Chief
Executive Officer and Chairman of the
Board into a dual mandate.
Admittedly, it is important to
strike a balance when considering
independence. Indeed, there is a
counterweight between having a
board that is totally independence
and having board members who
understand the underlying operations
of the business. What is therefore of
upmost importance is that the board
is in a position to act as sparring
partner for the management team,
and that the CEO is accountable to
a board composed of members who
have an in-depth understanding the
business and the topics at hand, whilst
possessing sufficient independence
to oppose senior management when
needed. With this in mind, it is also
essential that the board possess the
tools to take action when things
go wrong, including the power to
terminate the CEO. For this reason,
combining the roles of CEO and
chairman of the board cannot be
considered best practice.
Given the extensiveness of this practice
in the US market, companies who use
a dual mandate are often the target
of shareholder proposal requesting
the appointment of an independent
board chair. In the company’s case,
we believe that, whilst the company
has a high level of independence on
the board and has appointed a lead
independent director (a common
position for US companies using a dual
mandate to create), the move towards
a best practice governance structure,
including the appointment of a fully
independent chair, would be in the best
interests of all shareholders.
For this reason, we supported this
proposal at the company’s 2018
shareholder meeting, where it received
the support of 35% of shareholders.
PROXY VOTING SEASON OVERVIEW | 20
ROBECO’S PROXY VOTING APPROACH
Robeco’s Proxy Voting Approach
About RobecoOur Active Ownership team has been voting on behalf of Robeco’s clients since 1998, when proxy
voting emerged as an instrument for promoting responsible investing. Robeco’s dedicated voting
team offers a comprehensive proxy voting service and currently votes on behalf of clients at
approximately 5,000 meetings per year. All proxy voting activities are carried out by dedicated,
in house, voting analysts in the Active Ownership team. We provide our clients with an integrated
and cutting edge voting product, built up of 20 years of experience
Voting PolicyThe basis of any well informed proxy voting decision starts with the development of a proxy
voting policy designed to ensure that we vote proxies in the best interest of our clients.
Our voting policy is based on the widely accepted principles of the International Corporate
Governance Network (ICGN), which provide a broad framework for assessing companies
corporate governance practices. The ICGN principles offer scope for companies to be assessed
according to local standards, national legislation and corporate-governance codes of conduct.
We constantly monitor the consistency of our general voting policy with the ICGN principles,
laws, governance codes and systems as well as client specific voting policies. Our voting policy is
formally reviewed at least once a year. We also take into account company specific circumstances
and best practices when casting our vote. With our voting and engagement practices, we aim
to encourage the management teams of companies in which we invest to implement good
corporate governance and responsible policies to increase long-term shareholder value while
encouraging responsible corporate behavior.
PROXY VOTING SEASON OVERVIEW | 21
ROBECO’S PROXY VOTING APPROACH
Robeco’s Active Ownership Team
Robeco’s voting and engagement activities are carried out by a dedicated Active Ownership Team, working
in close collaboration with Robeco’s Investment Teams, and RobecoSAM’s Sustainability Investing Research
team. This team was established as a centralized competence centre in 2005. The team consists of 12
qualified active ownership professionals based in Rotterdam, the Netherlands, and Hong Kong. As Robeco
operates across markets on a global basis, the team is multi-national and multi-lingual. The team is headed
by Carola van Lamoen.
About Robeco
Robeco Institutional Asset Management B.V. (Robeco) is a global asset manager, headquartered in
Rotterdam, the Netherlands. Robeco offers a mix of investment solutions within a broad range of strategies
to institutional and private investors worldwide. As at 31 December 2017, Robeco had EUR 161 billion in assets
under management. Founded in the Netherlands in 1929 as ‘Rotterdamsch Beleggings Consortium’, Robeco
is a subsidiary of ORIX Corporation Europe N.V. (ORIX Europe), a holding company which also comprises the
following subsidiaries and joint ventures: Boston Partners, Harbor Capital Advisors, Transtrend, RobecoSAM
and Canara Robeco. ORIX Europe is the centre of asset management expertise for ORIX Corporation, based in
Tokyo, Japan.
Robeco employs about 877 people in 15 countries (December 2017). The company has a strong European and
US client base and a developing presence in key emerging markets, including Asia, India and Latin America.
Robeco strongly advocates responsible investing. Environmental, social and governance factors are
integrated into the investment processes, and there is an exclusion policy is in place. Robeco also makes
active use of its voting right and enters into dialogue with the companies in which it invests. To service
institutional and business clients, Robeco has offices in Bahrain, Greater China (Mainland, Hong Kong,
Taiwan), France, Germany, Japan, Luxembourg, Singapore, Spain, Switzerland, Sydney and the United States.
More information is available at www.robeco.com
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